City, Ultra remain at odds over Banning Lewis Ranch
Colorado Springs and Ultra Resources appear no closer to settling their dispute over the Banning Lewis Ranch, where Ultra wants to drill for oil and gas free of city controls and the Springs contends it has the legal right to regulate what the company does.
On Friday, the city filed a 54-page response to Ultra in U.S. Bankruptcy Court in Denver, in which it reiterated its contention that a 23-year-old annexation agreement and other land-use controls should govern the ranch’s development and cannot be “stripped away” as a result of Ultra’s purchase of ranch property this year.
Ultra has argued the opposite, asking a bankruptcy court to set aside the annexation agreement and other controls so that it can drill.
Not only are the two sides at odds over the ranch, but they’re also disputing whether they’ve engaged in fruitful talks to settle their differences.
In a Sept. 21 court filing, Ultra said it was “pursuing a consensual resolution of the issues” with the city; Ultra and city officials met in August and November. In its response Friday, the city “denies that there have been any recent efforts to reach a consensual resolution.”
The city’s response asks a Colorado bankruptcy judge to find that the ranch annexation agreement, other land-use agreements and city laws are “binding upon Ultra,” should “run with the land under Colorado law” and “are not the types of rights or interests that can be stripped away from property” because of Ultra’s purchase.
The city also asked the court to disallow Ultra’s claims that land-use agreements are “executory contracts” that could be rejected. Further, the city asked the court to affirm that the ranch’s surface and ground water rights belong to the city, which was a key annexation agreement provision.
“The city will continue to defend our rights in this matter,” City Attorney Chris Melcher said in a statement Friday. “We are open to a sensible outcome that will benefit the entire community. At this time, we are confident that we will prevail on all issues that are currently in dispute.”
It’s unknown when a judge might rule. Ultra officials couldn’t be reached for comment Friday.
At issue is the future of the Banning Lewis Ranch — whether it will become home to residential and commercial development as long envisioned or whether it will become the latest home to burgeoning oil and gas exploration efforts in Colorado and trigger debates over environmental, economic and developmental issues associated with drilling.
The ranch, annexed in 1988, makes up much of the city’s east side. Thousands of residences and businesses were envisioned, but only about 300 homes have been built and little other development has taken place because of changes in ownership over the years and the poor economy.
In October 2010, a pair of California limited liability companies that owned 21,400 acres of the approximate 24,000-acre ranch filed for Chapter 11 bankruptcy protection in a Delaware court.
In June, the ranch was auctioned; Ultra, a subsidiary of Houston-based Ultra Petroleum, won the right to buy 18,000 acres for $20 million. KeyBank National Association, a lender on the property, bought 2,400 acres of the ranch’s north side for $24.5 million and is seeking to sell its land.
After its winning bid, Ultra announced it wanted to drill on the property, and had no intention to pursue residential and commercial development. In subsequent court filings, Ultra argued it shouldn’t be bound by the 1988 annexation agreement and other controls that govern the land’s development.
The city objected, arguing, in part, that the controls were needed to ensure the property’s orderly development. The two sides agreed to move those disputed to a Colorado bankruptcy court from Delaware.
Since Ultra announced it wanted to drill for oil and gas, city officials also have said the company would need to re-zone the property, obtain a conditional use permit and amend the property’s master plan.
Last month, the Colorado Springs City Council adopted a six-month drilling moratorium while it studies environmental issues connected to drilling; that moratorium runs through May.
Even so, Ultra filed applications with the Colorado Oil and Gas Conservation Commission on Dec. 15 to drill two wells on the ranch. Several state regulatory processes must play out before the wells can be approved.
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